Air Force warns industry to expect delayed acquisition decisions

Listen to Jared's report.

With the start of fiscal year 2014 just a few days away and with no budget in
place, the military services are already in the process of briefing their
proposed fiscal 2015 budgets to Pentagon leaders. It's a highly uncertain process,
except for one thing: members of industry can expect a lot of routine decisions to
be delayed while the budget process gets hammered out.

In the case of the Air Force, 2013, the first year of sequestration, was not as
bad as it could have been. The service was able to reprogram funds so that it kept
major programs mostly intact, partially because it was able to use unexpended
funds from prior fiscal years, said Richard Lombardi, the Air Force's deputy
assistant secretary for acquisition integration. This is not a luxury the Air
Force will have next year.

The ongoing uncertainty means a lot of decisions to award contracts or to move to
the next milestone of a program are likely to be put on hold during the first part
of 2014.

"I think what we'll continue to see is things will continue to be slower as we're
trying to make financial decisions to make sure that we're not launching off on
something and then having to do a real quick redirect," he told an Air Force
Association breakfast Thursday. "The last thing we want is to march off, award
something, industry has teams ready to go and staffing up, and then we have to do
a complete 180 and rescope programs."

Lombardi said additional oversight from the Pentagon is also going to produce some
lag time for programs.

"[Requests for proposals] and source selection plans are getting unprecedented
levels of scrutiny all the way up the chain," he said. "On the [major acquisition
programs], Frank Kendall, [the undersecretary of Defense for acquisition,
logistics and technology] is personally reading the RFPs. We're going through a
lot of multiple reviews to make sure we've got everything put together in a tight
fashion."

2014 is all but certain to start out with a continuing resolution that funds the
government for only a small part of the fiscal year. And when it does, Lombardi
says the Air Force will begin to dole out dollars to its acquisition programs
carefully, funding them with only a portion of what the president's 2014 budget
request included. The Air Force is assuming the Pentagon would continue to be
funded at the level of the 2013 budget, minus sequestration cuts. But it's unclear
how long such a continuing resolution would last, whether Congress will eliminate
or amend sequestration, and how much flexibility DoD will have to move money
between accounts. And Congress still has not passed authorization bills for 2014
that tell the military how much money it's allowed to spend on a given program.

"Typically what we do during a continuing resolution is we'll allocate about 80
percent of our budget out to the programs, and the reason we need to do that is we
need to maintain some flexibility," he said. "That really helped us in 2013
because we didn't know how much we were going to be sequestered. So, by not
allocating the full amount out to programs, it allowed us to have a little bit of
a buffer so that programs were not overexecuting dollars."

If overexecuting dollars is the Air Force's biggest challenge over the next few
months, it's had the opposite one over the last few. While it's no secret that all
federal agencies make a big push to spend all their appropriations toward the end
of a fiscal year, 2013 was different, since most agencies spent half the year with
no idea what their final budget numbers were and with no ability to start new
programs. Reprogramming authorization from Congress to try to mitigate the impact
of sequestration also came very late in the fiscal year. So, Lombardi says,
there's now an urgent need to spend every procurement dollar the Air Force has.

"We're working almost daily with all the program executive officers to see what
they're actually putting on contract to minimize the amount of dollars that are
going to expire," he said. "In this environment, we cannot afford to have dollars
expire. That's just leaving money on the table."